Is pricing key to business success?

Competitive pricing is widely believed to be the key to profitability but does this mean you need to cut your prices to be on the winning team and what are the hidden costs of doing this? Most businesses have products, which are loss leaders, especially large companies who may appear to sell some of their goods at cost or below at all times. This may work for them but selling at such a low price is unlikely to be sustainable for most small and medium businesses.

Pound Sign

So when should you cut your prices and what are the risks of doing so?

It’s important to make sure your costing doesn’t lead to price wars with competitors. To ‘win’ you may have to sell at a prohibitive low cost and that will not make your business profitable in the long term.

If you always sell at discounted prices and customers expect this, what are you going to do to keep them interested and away from your competitors? To establish a sound and loyal customer base, keen pricing is only one variable. Offer quality products and great after sales service and competitive prices.

How to make your pricing consistent and competitive:

• Sales should be short and infrequent, for seasonal clearance or to introduce a new product at a low introductory price.
• Make sure you maintain the integrity of your brand when you price. Price too low and people may doubt the quality of your product or the reliability of your customer service.
• Keep your eye on the market and make sure your prices are relatively competitive. Make sure you keep within the limits of your need to make a profit and being competitive. A price range with an upper and lower limit will ensure you meet all these criteria.
• Be prepared to experiment with your pricing, find out your customers’ upper limits before demand falls off.

Pricing is important but works best when packaged with reliable customer service and quality products. Customer reviews are a proven way of establishing your brand that discount pricing alone will not achieve.

Image credit: StockMonkeys.com

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